It’s official - South Africa is in a technical recession. It’s the first time since 2008 that the country has again slipped into recession and the result is some serious financial strain. While this now has people rechecking budgets, cutting costs and recalculating their finances, the question on everyone’s minds is “How will this affect me on a daily basis?”
First off, we need to understand what the term actually means. A technical recession is two consecutive quarters of negative growth, according to Fin24. In South Africa’s case, the second quarter calculations have shown a decrease in GDP for the months of April, May as well as June.
StatsSA, quoted in Business Report, have stated that this significant decline in GDP was led by agricultural production, which dropped by around 29% in the second quarter of this year, following a 33,6% fall in the first quarter. The primary reasons for the decrease in production going into the second quarter, were huge droughts throughout the country and widespread crop damage.
There will be a knock-on effect of this recession, where individuals will battle to access affordable credit options, while the cost of lending will also increase considerably. With interest rates increasing, so too will the cost of personal loans, home loans, vehicle repayments and credit card debt.
Another thing to consider is people panicking and pulling out of much-needed investments like RAs, unit trusts and shares, which is not something that is recommended. While every South African should be more conscious of what they are using their money for, Old Mutual does bring a little respite by stating that “saving absolutely everything and not allowing yourself small spends like eating out once in a while or buying the clothes you need will only perpetuate the situation”.
At bsmart, we know that everyone still needs to buy groceries, toiletries and everyday essentials, and this is why we continually negotiate discounts with some of South Africa’s biggest retailers, in order to pass these savings on to our members. When they shop using their bsmart cards, they receive cashback that can be saved for a rainy day. We believe in helping each and every member to spend smart, save smart – and live smart.
For more advice, read our tips on saving for December, reaching your financial freedom goals, and teaching your kids about retirement. To learn more about bsmart contact us or click here to sign up directly through our website.
Disclaimer: bsmart does not provide financial advice. The above article is for information purposes only, to share current economic and financial topics and trends. Please consult a suitable and qualified financial services provider if you require financial advice.